February 28, 2018

House passes bill limiting operational risk capital requirements

The House of Representatives has passed H.R. 4296--which a Financial Services Committee press release describes as "a bill that addresses the burden that unnecessary operational capital requirements have imposed on financial institutions"--by a vote of 245 to 169. According to the release, the bill would ensure that existing capital standards are appropriately tailored and do not needlessly lock up capital by limiting the imposition of operational risk capital requirements on a bank's current activities and businesses and permitting adjustments to mitigate operational risk.

Committee chairman Jeb Hensarling (R-Texas) said, "H.R. 4296 simply amends the method of how reserve capital is calculated by establishing standards based on an organization's current business activities, making the requirements more accurate and tailored to a bank's current risk profile. That means banks would still retain sufficient reserves to weather an economic storm, but they would also be able to put the billions of dollars currently sitting on the sidelines to work to help fuel the economy."

But in a prepared floor statement opposing the bill, Ranking Member Maxine Waters (D-Calif) said the bill was "simply another rollback of rules put in place after the financial crisis. It would undermine the stability of our country's largest banks by restricting the way regulators set capital requirements for those institutions."